When evaluating the cost of business, one of the many that you can miss is the payroll service cost. Failing to pay attention to this amount can cause your business to lose money that you can spend in better places. While you may not believe you pay a lot of money to manage payroll, you might be surprised to discover the true amount. Between salaries, benefits, taxes, and other employee services, the cost can add up.
The amount of money it takes to manage payroll may change depending on circumstances, such as the frequency of pay periods or changes in benefits. Reducing the number of employees is not an automatic cost savings. Because the amount can vary, it is important to keep track of this cost to prevent over-paying. This article will focus on methods of reducing payroll costs as well as the benefits of this action.
What is Payroll Service Cost?
Payroll service cost is the amount of money required in order to pay your employees. The cost also includes any charges associated with the payroll. An example of this payroll service cost can be the amount of money it takes to hire an accountant to manage taxes.
If you are using an independent service, this cost will depend on frequency as well as the services performed. Other services that you may include in this cost include direct deposit and check printing. The costs are often a base fee plus costs per employee.
Who Uses Payroll Service Costs the Most?
Any business that has hourly or salaried employees will have payroll service costs. You cannot avoid these charges, as every business must withhold taxes as well as social security payments. If you are a large business and keep your payroll processing inside the company, you may find that you will have the highest payroll service cost. If you have a small business, you may find that you have a lower cost as a result of fewer employees. As you will see, this is not always the case.
How Much Is Usually Spent on Payroll Service Cost?
While the cost will vary depending on the provider and services they handle for you, you can expect to pay between $25 and $200 as a base fee. You will generally pay this fee per month. You can also expect to pay between $1 and $10 per employee per pay period. Some larger companies may pay lower amounts due to a volume discount.
Other payroll service charges may include employee reporting, check delivery, and the cost of inserting checks into envelopes. Fees that you may not use as often include emergency changes to payroll amounts or dates. If you have a rapid increase in the number of employees, you may pay a higher base fee. You may also pay various one-time fees, such as account set-up or account termination fees.
5 Ways in Which You Can Reduce Payroll Service Cost Spending
1. Consider changing to a new payroll service provider
There are a number of payroll processing companies, and they do not all charge the same rates. If you feel you are paying too much with your current processor, you may find another company that better meets your needs. Important things to inquire about include set-up fees, base price per month, fees that are not included in the base price, services that the company covers, and account termination fees. You may also want to ask about fees for rare events such as emergency payroll changes.
2. Ask for a discount
If you are a larger company, some payroll processing companies may offer volume discounts. The company may have introduced new discounts since you signed up that you did not notice. It never hurts to ask, and you may find other discounts that you were not aware of. If your business has used the processing company for a significant amount of time, you may want to ask about a loyalty discount. You may even want to ask about referral discounts if you tell others about the company.
3. Reduce the number of services that you outsource
If you are outsourcing every aspect of your payroll, you may want to consider if some of the tasks are jobs you can perform within the company. Look at the services that are not included in the base fee and ask yourself if they are something you can do. This may include items such as inserting checks into envelopes or giving employees their checks personally instead of direct deposit. Especially if you have a small business, this may be an easy method to save some money that will not take up a lot of your time.
4. Consider making employees into independent contractors
This step may not be possible for every business, but it is something to consider if you do not require your employees to be present at certain hours or do their jobs a certain way. If you use independent contractors instead of employees, they are responsible for their own taxes, as well as benefits and Social Security. This takes the burden off of you and puts it on them. However, this step will not work for many, as contractor laws can vary based on state.
5. Consider eliminating positions
If you are needing to significantly save money, reducing the number of your employees will not only reduce salary costs but may also reduce the cost of processing. This step is drastic and will affect your businesses in other ways, so it is a good idea to only use this method if you have no other options.
If you are needing to reduce your overhead costs, payroll servicing may be a good place to start. Are you looking to save some money? Do you know how much your payroll is costing you? Leave us a comment, and if you have some tips and tricks for others, please share your thoughts with others below.
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